Merkel: Greece Must Keep Agreement or Leave Eurozone

Greece will “always” stay a member of the European Union and would be better off remaining in the euro, German Chancellor Angela Merkel said.

“I believe it’s better for the Greeks to stay in the euro area, but that also requires that we set out a path on which Greece gets back on its feet step by step,” Merkel said during a panel discussion with high-school students in Berlin today. “Of course Greece can make it.”

Greece “will always be a member of the European Union, that’s not the issue at all,” Merkel said. “Rather, the solidarity for the euro will end only if Greece just says, ‘We’re not keeping to the agreement.’ But I don’t expect that to happen. I do think they are making an effort. There are many, many people in Greece who actually want it.”

Stocks and European government bonds fell and the euro weakened to a three-month low today on concern that Greece will exit the 17-nation currency union as the political impasse in Athens following inconclusive elections entered a second week.

“We have a very nervous situation in the euro zone,” Finance Minister Wolfgang Schaeuble told a separate school event in Berlin.

Schaeuble said the advantages of Greece staying in the euro outweighed any perceived gain from exiting the single currency. “But it will be strenuous,” he said. “The price if they decide to leave the euro is very high” and “would cause a huge amount of turbulence for all of us.”

‘Not at Fault’

Merkel said that she was “of course” concerned about the situation in Greece. “Because I believe that people who are absolutely not at fault now have to pay for the mistakes of the past,” she said. “That’s the sad thing.”

Merkel rejected the notion that her push for austerity has spurred a political backlash in Europe that has benefited parties such as France’s National Front. Still, policy makers must find answers to “this feeling of injustice” among citizens in countries such as Greece, she said.

The situation in Greece “won’t lead to civil war,” the chancellor said in response to a question from a student who said she was concerned about Greece deteriorating into conflict.

Greece has no alternative to pursuing budget savings whoever is in power, Merkel said.

“What’s completely normal to you -- that you can’t permanently spend more than you take in -- that applies to states as well,” she said. “You can vote for whomever you like, but at the end there’s no way around it.”